What are the benefits of having a child? A lot of positive things naturally come to mind, but you probably haven’t thought of the tax benefits! While they aren’t reason enough for having a child, they certainly are a welcome bonus when you realise the extra costs that come with being a parent.
If you are a Luxembourg taxpayer and you have one or more children, you are entitled to a number of tax benefits. Under certain conditions, non-residents considered equivalent to resident Luxembourg taxpayers may also be eligible for these benefits. Here’s an overview of the main benefits offered by the government.
In many families, both parents work and are thus required to pay for childcare, domestic services or assistance and care resulting from dependency. As of 1 January 2017, this standard rate for childcare costs was raised to a maximum of EUR5,400 per tax year. It cannot exceed the costs actually incurred or EUR450 per month.
(…) if you are married with two children under 18 and are yourself aged under 41 at the beginning of the tax year, you can deduct EUR5,376 for mortgage savings as of 2017.
If your children are part of the tax household, you can take advantage of higher tax deductions on certain investments (e.g. mortgage savings schemes and life insurance policies) and expenses (e.g. contributions and accident insurance premiums). The amount that can be deducted is doubled if you have a spouse or partner (if you are jointly taxed) and then increased by the original deductible amount for each child that receives a tax allowance.
For example, if you are married with two children under 18 and are yourself aged under 41 at the beginning of the tax year, you can deduct up to EUR5,376 (4 x EUR1,344) for mortgage savings as of 2017.
The tax benefits you are eligible for will vary depending on your civil status, tax situation, income and even the age of your children. This means it can be very difficult to provide a complete overview of the benefits you may be entitled to. Other benefits include:
We would advise you to consult a tax expert on these matters. This is the best way forward if you want to be sure you are taking advantage of all the benefits you are entitled to.
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